New Jersey Chooses People Over Profits in the Fiscal Year 2025 State Budget

By taxing the world’s most profitable companies to fund public transit, New Jersey’s latest state budget prioritizes people over corporate profits.

Published on Jun 28, 2024 in Tax and Budget

Headlined by a new tax on the world’s most profitable companies to fund public transit, New Jersey’s latest state budget prioritizes people over corporate profits. The newly adopted Corporate Transit Fee will collect $1.1 billion for NJ Transit, covering the agency’s looming budget shortfall and preventing drastic service cuts that would leave riders stranded.

This choice by lawmakers marks a significant departure from previous budget cycles that favored short-sighted corporate tax cuts and ignored long-term solutions for the state’s aging infrastructure. As the first-ever dedicated source of funding for NJ Transit, the Corporate Transit Fee will not only provide stable revenue to the historically underfunded agency but serve as a model for addressing New Jersey’s other pressing needs, from crumbling schools to an unprecedented shortage of affordable housing.

In this current era of record-breaking corporate profits that never seem to trickle down, there is no better time for lawmakers to call on those with the most wealth to pay their fair share towards the public goods that make New Jersey a great place to live, work, and raise a family.

The Corporate Transit Fee: A Model for New Jersey

At its core, the state budget is about what lawmakers choose to prioritize. This year, the choice was clear: The Corporate Transit Fee clawed back a $1 billion tax cut for large, mostly out-of-state corporations and set aside those funds to save NJ Transit, a pillar of the economy and lifeline for millions of riders.

The 2.5 percent fee will only be paid by corporations making more than $10 million in profits in New Jersey, like Amazon and Microsoft, and more than four out of five of the companies that will pay it are headquartered out-of-state. This policy recognizes that wealth generated in New Jersey is better off reinvested in New Jersey rather than sitting in a billionaire’s bank account or a corporate shareholder’s stock portfolio. And this is just the beginning.

State lawmakers will need to make similar choices in the future to further improve transit, upgrade centuries-old school buildings, develop new affordable homes, expand access to child care, and strengthen programs that make the state affordable for working-class families.

Looking ahead to next year’s budget, Fiscal Year 2026 already looks to be more challenging than this year’s financial outlook. The newly enacted state budget has the state operating at a structural deficit, where the state expects to spend $2.1 billion more than it’s projected to collect in revenue. This is compounded by projected cost increases on everything from health insurance to construction supplies. Making matters worse, the state continues to plow ahead with a regressive and expensive property tax credit program for senior homeowners, which will cost more than $1 billion annually with no funding source to pay for it. Without additional revenue, the state will struggle to afford its existing obligations, let alone any new investments.

And with elections looming in the next budget cycle, there is no shortage of new policy ideas from gubernatorial candidates, from guaranteed income to affordable child care for all to expanding health care access. But all of these ideas will require more revenue. Drawing on revenues from progressive sources like the Corporate Transit Fee will be crucial to ensuring that those who have benefited most from our state’s economy pay back what they owe to the rest of the state’s residents.

New policies that improve the daily lives of New Jersey residents will require broader changes to the tax code. Corporate tax reforms like “worldwide combined reporting” would close loopholes exploited by multinational corporations. The state could also rein in multi-billion-dollar tax credit programs for developers, Hollywood studios, and artificial intelligence companies with questionable returns on investment for residents. Additionally, lawmakers could end sales tax exemptions for high-end professional services and luxury goods like yachts, and reform taxes on inherited wealth on very wealthy estates.

As wealth accumulates further in the pockets of a small group of wealthy individuals and multinational corporations, it will take more of the same thinking embodied by the Corporate Transit Fee to deepen the state’s investments and build an economy that works for everyone.

Highlights and Lowlights

In many ways, the new state budget mirrors Governor Murphy’s proposal from earlier this year. Even with tax collections coming in lower than projected and federal pandemic aid expiring, the budget maintains funding for critical obligations and programs, from NJ Transit to another full pension payment to a record level of school funding.

With the budget now final, here are some highlights and lowlights on some of the key benchmarks and priorities NJPP identified earlier this year.


Corporate Transit Fee for NJ Transit
The new fee will collect more than $1 billion in fiscal year 2025 for NJ Transit, consistent with what Governor Murphy proposed in his initial budget. This will be NJ Transit’s first-ever dedicated funding in its 45-year history. Roughly 600 companies, 81 percent of them headquartered out-of-state, will pay the fee.

Full Pension Payment
The $7.1 billion pension payment continues a four-year streak of full payments, meeting the state’s promise to public workers and retirees while improving the state’s fiscal outlook and credit rating.

Increased School Funding
More than $900 million goes to additional K-12 school funding, including around $45 million to assist districts still receiving cuts even under a fully-funded school formula. Although these additions to the final budget do not entirely eliminate those cuts, the increase in overall school funding puts needed investments in New Jersey’s public school system.

Preserved Surplus
A $6.2 billion surplus maintains the levels from the governor’s original proposal, ensuring the state has funding left over to address any future economic downturns. Lawmakers resisted the urge to spend down the surplus, keeping the state prepared for volatile economic conditions.


No Improvements to Tax Credits for Working Families
Family tax credits such as the Earned Income Tax Credit and Child Tax Credit remain flat-funded despite the high cost of living in the state. At the same time, the Legislature failed to advance bills to address the state’s appallingly low WorkFirst New Jersey grants for families in extreme poverty. 

Business Tax Credit Frenzy
In contrast to the lack of assistance for low- and middle-income families, the Legislature continued the feeding frenzy of business tax credits, loosening restrictions on credits for film and television productions and real estate development projects, while opening up half a billion dollars in credits to artificial intelligence, an unproven industry with ethical and environmental concerns.

Another Raid of the Clean Energy Fund
Instead of dedicating Clean Energy Fund dollars to support green energy upgrades for NJ Transit, the budget continues the state’s pattern of raiding the fund to pay for the agency’s basic utility costs.

No Reduction in the Cost of Communication for People Incarcerated
The final budget does not include funding to eliminate the high cost of communication for people incarcerated in state facilities. Currently, people who are incarcerated and their families must pay private contractors to send electronic messages and for phone and video calls, and even short conversations can cost more than a day’s pay.